Mauritius - a hidden investment for Islamic Finance

1. Mauritius,asmallislandsituatedoffthe
EastcoastofAfrica,isoneoftheworld's
topluxurytourismdestinationsanda
hiddeninvestmentdestinationforIslamic
finance.
OnceaFrenchandlateraBritishcolony,
Mauritiushasahybridlegalsystem
combiningboththecivilandcommon
lawpractices,governedbyprinciples
derivedfromtheFrench'CodeNapoleon'
andtheBritishcommonlaw.Asearly
as1941,provisionwasincludedin
itslawforwhatwasoriginallycalled
theMuhammadanWaqfOrdinance,
whichlaterbecametheWaqfAct,
enablingMuslimstobequeathproperty
inperpetuityforcharitable,piousor
religiouspurposes.
Mauritius,strategicallylocatedinthe
IndianOcean,hasbuiltasolidreputation
asapremierinternationalbusiness
hub,providingoperationalsecurityand
commercialflexibilitytoinvestorsover
thepast2decades.Mauritiusranks20th
inthelistofeaseofdoingbusiness.
Theislandhasmanagedtosellitself
asAfrican,Indian,Chinese,French
andBritishsimultaneously.Itstrading
partnersessentiallyaretheEuropean
Union,India,China,SouthAfricaandthe
UnitedStates-longtradingrelationships
datingbacktotheearlysettlersandthe
postcolonizationera.CapeofGood
Hope(CapeTown,inSouthAfrica)and
Mauritiuswereknowntosailorsasearly
as1497.
TheMauritianeconomy,historically
basedonsugarproduction,hasmoved
toafarmorediversifiedeconomy.It
hasexpandedintotextileandclothing,
tourismandmorerecentlyinfinancial
servicestofullyintegratetheglobal
economy.
SUKUK
By:Dr.MuniruddeenLallmahomood
ISLAMICFINANCEINMAURITIUS:
THEHIDDEN
INVESTMENT
DESTINATION
AboutDr.MuniruddeenLallmahomood
Dr.MuniruddeenLallmahomoodistheActingChief
ExecutiveOfficerofCenturyBankingCorporationLtd,
afully-fledgedIslamicBankinMauritius.Amonghis
manyeducationalqualificationsareaDoctorinBusiness
AdministrationfromtheUniversityofSouthAustraliaand
aProfessionalCertificateofCertifiedShariaAdvisorand
AuditorfromtheAccounting&AuditingOrganizationfor
IslamicFinancialInstitutions(AAOIFI).Hislengthywork
experienceincludesConsultantinIslamicFinanceatthe
CentralBankofMauritius,AuditingandManagement
Consultant.HeisalsoaguestprofessorinIslamic
financeatParis-DauphineUniversityandtheUniversityof
Strasbourg.
46www.businessislamica.comVOL8-Issue847

2. SUKUK
receivedtheattentionoftheMauritian
government.Inlinewiththegovernment’s
Ministerannouncedseveralchanges
inthe2006budget.TheBankingAct
2004wasamendedtoincludeIslamic
BankingBusinesses.Accordingto
theGuidelineforConductingIslamic
BankingBusinessesissuedbythe
BankofMauritius(BoM)in2008,all
existinglicensedbanksweredeemed
theconceptofIslamicWindows.The
Guidelinealsosetstherequirementofa
Shari’ahadvisororShari’ahsupervisory
Islamicbankingbusinesses.
TheMauritiangovernmentalso
recognizedthatgiventhenatureand
theytendedtoattractmoretaxthan
theircounterparts.Theoverallpolicy
approachwastoalignthetaxtreatment
ofIslamiccontractswiththetreatment
policy,theFinanceActof2009waived
theimpositionofdoublestampdutiesin
Islamictransactionsinvolvingrealestate
andmovableproperty.Thesameyear,the
BoMbecameafullmemberoftheIslamic
FinancialServicesBoard(IFSB),andthe
FinancialServicesCommissionoptedfor
theAssociateMembership(FSC2010).
Mauritiusbecamethusthesecondnon-
IslamiccountryafterSingaporetojoin
theIFSB.In2011,theBoMmadeanother
leapwhenitjoinedtheInternational
IslamicLiquidityManagement
Corporation(IILMC).Inthesameyear,
theMauritiusRevenueAuthorityissued
astatementofpracticeforMurabahato
avoiddoublevalueaddedtaxes(VAT).
Meanwhile,newactors,productsand
servicesstartedtoemergeinthemarket.
In2008,theBritishAmericanInsurance
launcheditsIslamiclifeInsurance
(Takaful)andtheMauritiusLeasingLtd
andservicesin2009.Inthesameyear,
HSBCBank(Mauritius),whichsolely
anIslamicwindowundertheworldwide
HSBCAmanahbrandinMay2009.
InMarch2011,CenturyBanking
CorporationLtd,ajointventurebetween
BritishAmericanInvestment,alocal
basedcompanyandDomasol,aMalta
basedcompany,beganitsoperationsas
2013).Whilethewealthmanagementunit
ofthedomesticHongKongandShanghai
BankingCorporationLtdstartedto
distributeShari’ahGlobalEquityFund
inthelocalmarket,theIslamicWindow
HSBCAmanahceasedoperationinJune
2012.
MauritiusasastrategicGlobalBusiness
CentreintheIndianOceanregionwhich
combinestheadvantagesofatraditional
fortreatybasedtaxplanningthroughits
networkofdoubletaxationavoidance
vehiclefortaxstructuringandplanning
undertwocategoriesofGlobalBusiness
Companies(GBCs)license-GBC1
incometaxof15%.However,companies
orfundsholdingaCategory1Global
atamaximumrateof3%andcanend
uppayingnoincometaxdependingon
theforeigntaxcredit.Dividendspaidby
aMauritiancompanyareexemptfrom
taxandnocapital-gainstaxexistsother
thanonsaleofimmovableassetsin
Mauritius.Mauritiusasoftodayhasan
activedoubletaxationagreement(DTA)
with41countries.
forinternationalinvestors,itcouldalso
areonlythreeShari’ahglobalfunds
domiciledfromthelocaljurisdiction.
Otheropportunitiesinthesectorinclude
theissuanceofSukuk.Theislandisan
ideallocationforsettingupanSPVasthe
issuerinaSukuktransaction.AllSPVs
willbeenforceableinMauritius.Incase
ofdispute,thecourtinMauritiuswillgive
bythepartiesandthepartiescanhave
recoursetothePrivyCouncilinEngland
whichistheultimatecourtofappeal.
Mauritiusexhibitstremendouspotential
bankingcenterandasabridgetoAfrica.
Themeasuresundertakenteamedwiththe
Island’snaturaladvantagesundoubtedly
positionitasanattractiveinvestment
TheMauritian
economy,
historically
basedonsugar
production,has
movedtoafar
economy.It
hasexpanded
intotextileand
clothing,tourism
andmorerecently
servicestofully
integratethe
globaleconomy
MAURITIUSHASBEENSUCCESSFULINACHIEVINGARAPIDGROWTH
RATEWHICHCANBEATTRIBUTEDTOTHECOMPREHENSIVE
ADJUSTMENTPROGRAMSLAUNCHEDBYTHEGOVERNMENTINTHE
EARLY1980s.OVERTHEPASTTWODECADESREALGDPGROWTH
HASAVERAGEDABOUT4-6%PERYEAR,LEADINGTOARISEINPER
CAPITAINCOME.ITSGDPGROWTHRATE(ANNUAL%)WASLAST
REPORTEDAT3.3%IN2012WHILETHE“FINANCIALANDINSURANCE
ACTIVITIES”EXPANDEDBY5.7%,HIGHERTHANTHE5.5%GROWTH
PREVIOUSLYESTIMATED(STATISTICSMAURITIUS,MARCH2013ISSUE).
48www.businessislamica.com